Researchers call for electric lease subsidies to help low-income households

Subsidizing an electric lease car is a targeted way to structurally protect low-income households from transport poverty caused by rising fuel prices, researchers said on Thursday in the economists' journal ESB.

This is in contrast to a broad fuel duty reduction, which the researchers describe as an "expensive measure." A fuel tax discount introduced in 2022 that is still in place "costs 1.7 billion euros per year and mainly benefits higher-income households," Peter Mulder, Rens van Tilburg, and Reinier Sterkenburg wrote in ESB.

The researchers estimate that a budget of roughly 1.1 billion euros would be enough to provide 160,000 low-income households with an electric lease car. Their calculation is based on a subsidy of 7,000 euros for each vehicle.

"Electric driving can make households less vulnerable to rising fuel costs, but the upfront price of an electric car remains out of reach for many low-income households. A lease subsidy could help remove that financial obstacle."

Households with the lowest incomes are hit hardest by rising fuel prices, spending on average twice as large a share of their income on fuel, according to the researchers. However, broad compensation measures tend to benefit wealthier households far more than those who need the support most.

By removing the high upfront costs of an electric car, households can benefit from the lower energy and maintenance costs of an electric vehicle. "From an economic perspective, social leasing corrects an important market failure: households with limited financial resources are often unable to invest in a vehicle that is ultimately cheaper to use."

The researchers said the Dutch government is looking into launching a similar scheme, inspired by France's approach. France introduced Europe's first national social leasing program in 2024, targeting households in the lower half of the income spectrum.

In France, the program was aimed at people who needed a car for their jobs. It covered only fully electric vehicles priced below 47,000 euros, with the government covering the initial costs of the lease. According to ESB, this brought monthly payments for smaller models down to roughly 100 to 140 euros. The scheme proved popular, attracting tens of thousands of lease agreements.